If a party cites a fact-finding reason in a criminal decision, the civil court shall indicate in its decision the reasons of its inner conviction as a result of its investigation of the facts determined in such criminal decision; otherwise, the court would be unlawful for insufficiency of grounds in its decision (Taiwan)

2017.12.5
Jonathan Chao

The Supreme Court rendered the 106-Tai-Shang-465 Civil Decision of October 5, 2017 (hereinafter, the “Decision”), holding that if a party cites a fact-finding reason in a criminal decision, the civil court shall investigate and indicate in its decision the reasons of its inner conviction as a result of the investigation of the facts determined in such criminal decision. Otherwise, the civil court would be unlawful for insufficiency of grounds in its decision within the meaning of Article 469, Subparagraph 6 of the Taiwan Code of Civil Procedure.

 

According to the facts underlying this Decision, the Appellee was the Securities and Futures Investors Protection Center (hereinafter, the “SFIPC”), who asserted as follows. As the chairman and actual responsible person of a company, the Appellant knew that the US-denominated asset of overseas convertible bond whose issuance had been applied to repay the matured corporate bond could not be raised in time (hereinafter, the “Tip at Issue”) and that the Tip at Issue could have potentially material impact on the company’s share prices.  However, the Appellant still instructed the sale of the shares before the Tip at Issue was announced and was thus in violation of laws and regulations such as the Securities and Exchange Act.  Therefore, the Appellant should be liable for damages to persons who traded in the opposite direction in good faith.   Although the SFIPC lost the first instance trial, it prevailed in the second instance trial.  Dissatisfied, the Appellant appealed to the Supreme Court.

 

According to the Decision, although the facts determined in a criminal decision do not necessarily bind an independent civil lawsuit, still if a reason for facts determined in a criminal decision is cited by a party, the civil court should investigate and indicate in the decision the reasons of its inner conviction from the discretionary investigation of the facts determined in such criminal decision. Failure to do so certainly constitutes insufficiency of grounds within the meaning of Article 469, Subparagraph 6 of the Taiwan Code of Civil Procedure.

 

It was concluded in the Decision that although the Appellant had cited a criminal decision as evidence in the trial of factual issues to contend that the timing and sequence of the stock sale had nothing to do with the Tip at Issue and thus the Appellant did not commit insider trading, the original trial court still failed to indicate in its decision the reasons for its consideration of the merits in this case and rendered a decision unfavorable to the Appellant. Since this constitutes a legal violation for insufficiency of grounds in the decision, the original decision was reversed and remanded to the Taiwan High Court.